JPMorgan has released a research report stating that Johnson Electric Holdings (00179) issued a profit warning for the first half of the fiscal year ending September, expecting net profit to fall 56% to 62% year-on-year. The bank has lowered its price target for the company from HK$21 to HK$18, maintaining a "Neutral" rating.

JPMorgan noted that Johnson Electric Holdings revenue was broadly stable in the first half, with net profit expected to range between US$50 million and US$58 million, representing a sequential decline of 16% to 27%. The bank highlighted three key points: (1) foreign exchange-related impacts accounted for approximately two-thirds of the year-on-year earnings decline, but persistent pricing pressure and cost inflation also weighed on underlying profitability; (2) growth in solid oxide fuel cells (SOFC) has yet to offset weakness in traditional businesses, and delays in the ramp-up of Chinese automotive projects continue to limit utilization of existing capacity; (3) despite the bank's downward revision to near-term earnings forecasts, rising contributions from new businesses and operational efficiency measures provide identifiable drivers for medium-term margin improvement.

The bank has cut its net profit forecasts for Johnson Electric Holdings for fiscal years 2027 to 2029 by 29%, 22%, and 23% respectively, to US$169 million, US$247 million, and US$309 million, which are 25%, 8%, and 7% below market expectations. The bank forecasts gross margin to decline from 23% in fiscal year 2026 to 21.5% in fiscal year 2027, before improving to 22.5% and 23% in fiscal years 2028 and 2029 respectively, supported by improved utilization, economies of scale from new businesses, and manufacturing capacity expansion.